Buying a home in Texas can be an exciting yet challenging experience, especially when trying to determine affordability. This is where using a USDA loan calculator can help!
As a Texas resident looking to buy my first home, I found the USDA loan calculator to be an invaluable tool in estimating my mortgage payment and qualifying for a USDA home loan.
In this comprehensive guide, I’ll explain what a USDA loan is, who qualifies, and walk through step-by-step how to use the USDA loan calculator for Texas homebuyers. I’ll also provide tips for maximizing your USDA loan eligibility.
What is a USDA Home Loan?
USDA home loans are government-backed mortgages aimed at helping low-to-moderate income buyers in rural areas purchase a home.
Some key features of USDA loans include:
- Require no down payment
- Offer competitive interest rates
- Allow gifted funds for closing costs
- Have flexible credit score requirements (typically 640+ FICO)
The loans are backed by the U.S. Department of Agriculture’s Rural Housing Program. While they are often associated with farmland, USDA home loans can be used to buy homes in many suburban and small town areas too.
Nearly the entire state of Texas is eligible for USDA loans, with exception of the central metro areas like Houston, Dallas, San Antonio and Austin.
USDA Loan Calculator for Texas
Now that you understand the basics of a USDA mortgage, let’s go through how to use a USDA loan calculator online to estimate your Texas home loan.
Here are the steps:
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Enter Home Price – Input the price of the home you wish to buy. This will be the loan amount.
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Down Payment – USDA requires no down payment, so you can enter $0 if you wish. However, any down payment you make will lower the loan amount.
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Interest Rate – Enter your estimated interest rate based on current mortgage rates. Rates for USDA loans are very competitive
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Loan Term – USDA offers 30 year fixed rate terms only
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Property Taxes – The calculator will estimate taxes for you, but you can override this with your specific tax rate.
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Home Insurance – Estimate your home insurance cost. Expect $800-2,000 per year.
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USDA Funding Fee – This upfront cost is 1% of the loan amount.
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USDA Annual Fee – This ongoing cost is 0.35% of the loan amount per year.
Once entered, the USDA mortgage calculator will show your estimated monthly payment including principal, interest, taxes, insurance and fees.
It also breaks down the upfront costs so you know how much cash to save for closing.
USDA Loan Eligibility in Texas
In addition to using the USDA loan calculator, make sure you qualify for the program’s income and home location requirements:
Income Limits – Your household income must be below the limit for your county and family size. Limits range from $60,000 to $108,000 in Texas.
Home Location – Home must be in an eligible rural area. Almost all of Texas qualifies outside major metros.
Credit History – Minimum 640 FICO score for most lenders, but some may approve lower scores.
Debt-to-Income – Your total monthly debt payments, including the new mortgage, should be less than 41% of gross monthly income.
Work History – Expect to need at least 2 years of stable income history. Self employed may require 2 years of tax returns.
Tips for USDA Loan Pre-Approval
Here are a few tips as you move forward with using the USDA mortgage calculator and applying for home loan pre-approval:
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Get pre-qualified to confirm you meet income and credit requirements. This helps narrow your home search.
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Make sure the home meets USDA requirements such as being a single-family residence and in good condition.
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Work on improving your credit score and reducing debt, if needed, to qualify for better rates.
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Compare multiple lender quotes for the best USDA loan rates and fees.
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Ask about down payment or closing cost assistance that may be available.
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Work with a real estate agent familiar with the USDA loan program.
Benefits of Using a USDA Home Loan
Hopefully this guide provides a comprehensive overview of using the USDA loan calculator and qualifying for a USDA-backed mortgage in Texas.
Some key benefits of this loan program include:
- Requires no down payment or minimum cash reserve.
- Offers fixed low interest rates and affordable payments.
- Allows gifted funds from family for down payment and closing costs.
- Features more flexible credit score requirements than conventional loans.
- Has lower mortgage insurance costs than FHA loans.
- Can be assumed by a new buyer if you sell the home.
The USDA mortgage calculator gives Texas homebuyers a powerful tool to open the doors to homeownership, even if you haven’t saved a down payment. Be sure to verify your eligibility and pre-qualify with a lender today!
USDA Loan Calculator Definitions
| Input | Explanation |
|---|---|
| Home Value | Home value is the total estimated purchase price of the home. |
| Down Payment | Down payment is the amount of money you intend to pay upfront for the home at closing. USDA loans dont require a down payment, but putting money down can reduce your starting loan amount. |
| Interest Rate | Interest rate is the cost of borrowing money to purchase your home with a USDA loan. APR stands for “Annual percentage rate” and is used to help estimate your interest rate, including origination fees. |
| Loan Term | Loan term is the length of time you want to repay the loan. Typically, USDA loan terms are set for a period of 15 or 30 years. |
| Property Tax | Property taxes are generally estimated to be 1.2% of the homes value but will vary depending on your location. |
| Home Insurance | Annual homeowners insurance is typically 0.35% of the homes value. Homeowners insurance is usually included in your monthly mortgage payment for USDA loans. Still, you pick your insurance provider and can change insurers at any point in the future. |
USDA Loan Payment Breakdown
Our USDA loan calculator gives you the total estimated monthly payment and a monthly breakdown showing how your payment is calculated. You will see the following:
- Principal & Interest
- Taxes
- Insurance
- USDA Annual Fee
These calculations are based on your specific inputs, as described above. Principal & Interest accounts for most of your monthly USDA loan payment. Principal represents the money youve borrowed to purchase your home and builds up in the form of equity as each monthly payment is made.
How Does A USDA Loan Work In Texas?
FAQ
What is the income limit for USDA loans in Texas?
What is the debt to income ratio for USDA loan?
How is the maximum loan amount calculated in USDA?
How much house for $3,500 a month?
How do I use a USDA mortgage loan calculator?
To use the USDA mortgage loan calculator, you’ll need to input values for some basic information, including your estimated home price, down payment (if any), loan term (in years), and interest rate. USDA loans typically don’t require a down payment, but you can enter an amount to see how much less your monthly payments might be if you chose to put money down.
What is a USDA mortgage & closing cost calculator?
This USDA mortgage and closing cost calculator will estimate the loan amount for eligible home buyers, including the USDA funding fee, and the monthly loan payment; including real estate taxes, home insurance, and monthly mortgage insurance (also called PMI).
What is the cost of a USDA loan?
The USDA annual fees amount to 0.35% of the loan amount due each year, which is collected as part of the loan’s monthly payments. The cost of a USDA loan includes this fee, and the USDA backs mortgages only in designated rural areas for borrowers with low to moderate income, who must also fall within household income limits for their household size and location.
Where can I get a USDA loan from?
USDA loans are provided directly through USDA Rural Development or from an approved lender for qualified borrowers. Use this calculator to estimate what your monthly payment might be for a USDA mortgage.